Telefónica Colombia, KKR form company for FTTH deployment

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Telefónica Colombia and the investment firm KKR announced an agreement to form a new company that will be responsible for implementing the most ambitious project for the deployment of fiber to the home (FTTH) network in Colombia, from which all operators in the market will be able to benefit.

The objective of the new company, leader in the country, will be to bring the advantages of fiber optic to nearly 90 cities in the country in the next three years, with a network that will cover 4.3 million Passed Property Units (PDUs), including all the relevant markets in the country.

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The agreement establishes that the new company will be 60% owned by KKR and 40% by Telefónica Colombia. Telefónica will contribute its current FTTH infrastructure, which already reaches 50 cities and municipalities and which -at the end of the first quarter of 2021- covered 1.2 million homes.

On account of this transaction, which values the new company at US$ 0.5 billion (approximately 20 times proforma OIBDA and US$ 410 Enterprise Value per PDU), Telefónica Colombia will receive a payment of US $0.2 billion and will be eligible for a performance-based consideration of up to US $0.1 billion.

Telefónica Movistar Colombia currently has more than 380,000 customers using its fiber service with symmetrical speeds of up to 500 MB. This deployment has allowed the average speed of residential navigation in the municipalities where this technology is present to be much higher than in other locations.

These 4.3 million PDUs will contribute to the goal of the Government of Colombia of reach 70% of connected households and, above all, to improving the speed of connectivity in the country, which will help to advance the goal of eliminating inequalities in the digital transformation.

For Laura Abasolo, General Director of Finance, Control and Corporate Development of Telefónica S.A. and head of Telefónica Spanish-speaking Latin America, “this new announcement is another step in the path that the company has set out in the region to ensure profitable growth, crystallizing the value to its infrastructure and implementing innovative and agile business models that improve the return on invested capital”.

Alfonso Gómez Palacio, CEO of Telefónica Spanish-speaking Latin America, explained that “the agreement with KKR will accelerate the deployment of fiber optic in Colombia at an unprecedented rate, in a market that has shown enormous potential in the last year. In addition, fiber will create opportunities for thousands of homes and businesses that see digitalization as an opportunity for development. This is one more step by our company to lead FTTH services in Latin America”.

KKR is an investment firm with extensive experience in wholesale fiber optic business platforms in other countries, complementing Telefónica’s own experience in fiber deployment and operation in the different countries where it is present.